Arthur J. Gallagher & Co. (AJG) 8-K Arthur J. Gallagher & Co. Announces Record

Exhibit 99

FOR IMMEDIATE RELEASE	CONTACT:	Marsha J. Akin
		Investor Relations
		(630) 773-3800
		www.ajg.com

ARTHUR J. GALLAGHER & CO. ANNOUNCES RECORD

SECOND QUARTER 2004 FINANCIAL RESULTS

ITASCA, IL, July 27, 2004 — Arthur J. Gallagher & Co. today reported its financial results for the quarter and six-month period ended June 30, 2004. A printer-friendly format is available atwww.ajg.com.

Quarter Ended June 30

													Diluted
	Revenues						Net Earnings						Earnings Per Share
Segment	2nd Q 04		2nd Q 03		Chg		2nd Q 04			2nd Q 03			2nd Q 04		2nd Q 03
	($ in millions)						($ in millions)
Brokerage	$	224.9	$	202.8	11	%	$	35.0		$	28.6		$	0.37	$	0.31
Risk Management		92.8		78.3	19	%		11.5			7.7			0.12		0.08
Financial Services		26.2		17.9	—			(0.4	)		(0.1	)		—		—
Impact of FIN 46		35.0		—	—			—			—			—		—
Total Company	$	378.9	$	299.0	27	%	$	46.1		$	36.2		$	0.49	$	0.39
Six Months Ended June 30
													Diluted
	Revenues						Net Earnings						Earnings Per Share
Segment	6 Mths 04		6 Mths 03		Chg		6 Mths 04			6 Mths 03			6 Mths 04		6 Mths 03
	($ in millions)						($ in millions)
Brokerage	$	429.0	$	390.8	10	%	$	61.5		$	48.7		$	0.65	$	0.52
Risk Management		181.2		155.0	17	%		21.9			15.8			0.23		0.17
Financial Services		49.3		7.5	—			1.6			(16.4	)		0.02		(0.17	)
Impact of FIN 46		60.9		—	—			—			—			—		—
Total Company	$	720.4	$	553.3	30	%	$	85.0		$	48.1		$	0.90	$	0.52

“This was another strong quarter for Gallagher despite softening rates in the insurance marketplace. Our Brokerage and Risk Management segments each posted record second quarter earnings,” said J. Patrick Gallagher, Jr., President and Chief Executive Officer. “On a combined basis our Brokerage and Risk Management segments posted excellent results for the second quarter:

• 26% growth in earnings per share,

• 13% growth in revenues, of which 8% is organic,

• 20% growth in pretax earnings, and

• 18% pretax margin, a 1.1 point improvement over second quarter 2003, despite margin drag of 0.4% related to expensing stock-based compensation and 0.3% related to foreign currency translation.

“These results demonstrate that Gallagher’s core businesses are performing well in the changing marketplace. Every day our professionals are out there working together to deliver the best value for our customers while continuing to grow value for our shareholders.”

(1 of 6)

Brokerage Segment Second Quarter Highlights – Record Earnings

• 19% growth in earnings per share.

• 11% growth in revenues, of which 4% is organic.

• 14% growth in pretax earnings.

• 19% pretax margin, a 1 point improvement over second quarter 2003, despite margin drag of 0.5% related to expensing stock-based compensation and 0.4% related to foreign currency translation.

• Acquisition pipeline remains strong.

Risk Management Segment Second Quarter Highlights – Record Earnings

• 50% growth in earnings per share.

• 19% growth in revenues; all of which is organic.

• 41% growth in pretax earnings.

• 16% pretax margin, a 3 point improvement over second quarter 2003.

Financial Services Segment Highlights

• Synthetic fuel production was ahead of prior year, resulting in a 20% effective tax rate for the company in 2004 versus 25% in 2003.

• Adoption of FIN 46 - In the third quarter of 2003, Gallagher adopted a new accounting pronouncement, FASB Interpretation No. 46 (FIN 46) - “Consolidation of Variable Interest Entities,” which required the company to consolidate one investment not previously consolidated because the company does not control the investment through a majority voting interest. Previously reported financial statements were not restated for the adoption of FIN 46.

The company will host a webcast conference call on Wednesday, July 28, 2004 at 9:00 a.m. ET to further discuss these quarterly results. To listen, please go towww.ajg.com.

Arthur J. Gallagher & Co., an international insurance brokerage and risk management services firm, is headquartered in Itasca, Illinois, has operations in nine countries and does business in more than 100 countries around the world through a network of correspondent brokers and consultants. Gallagher is traded under the symbol “AJG” on the New York Stock Exchange.

This press release may contain certain forward-looking statements relating to future results. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expected, depending on a variety of factors such as changes in worldwide and national economic conditions, changes in premium rates and in insurance markets generally and changes in securities and fixed income markets as well as developments in the area of tax legislation. Please refer to our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K, for a more detailed discussion of these factors.

(2 of 6)

Arthur J. Gallagher & Co.

Segment Statement of Earnings

(Unaudited - in millions except per share data)

	3 Months Ended June 30, 2004			3 Months Ended June 30, 2003			6 Months Ended June 30, 2004			6 Months Ended June 30, 2003
BROKERAGE SEGMENT
Commissions	$	195.1		$	180.3		$	376.9		$	348.9
Fees		36.7			31.1			65.4			58.8
Investment income - fiduciary		2.9			1.7			5.4			3.5
Gross revenues		234.7			213.1			447.7			411.2
Less brokerage		(9.8	)		(10.3	)		(18.7	)		(20.4	)
Revenues		224.9			202.8			429.0			390.8
Compensation		129.5			118.2			251.9			232.9
Operating		42.6			41.2			85.0			82.6
Depreciation		3.2			3.0			6.3			6.0
Amortization		5.9			2.2			9.0			4.3
Expenses		181.2			164.6			352.2			325.8
Earnings before income taxes		43.7			38.2			76.8			65.0
Provision for income taxes		8.7			9.6			15.3			16.3
Net earnings	$	35.0		$	28.6		$	61.5		$	48.7
Diluted net earnings per share	$	0.37		$	0.31		$	0.65		$	0.52
Growth - revenues		11	%		17	%		10	%		19	%
Organic growth in commissions and fees (1)		4	%		14	%		4	%		14	%
Growth - pretax earnings		14	%		32	%		18	%		19	%
Compensation expense ratio		55	%		55	%		56	%		57	%
Operating expense ratio		18	%		19	%		19	%		20	%
Pretax profit margin		19	%		18	%		17	%		16	%
Effective tax rate		20	%		25	%		20	%		25	%
RISK MANAGEMENT SEGMENT
Fees	$	92.4		$	78.0		$	180.5		$	154.5
Investment income - fiduciary		0.4			0.3			0.7			0.5
Revenues		92.8			78.3			181.2			155.0
Compensation		50.2			43.4			98.5			85.7
Operating		25.7			22.3			50.3			43.7
Depreciation		2.4			2.4			4.8			4.7
Amortization		0.1			—			0.2			—
Expenses		78.4			68.1			153.8			134.1
Earnings before income taxes		14.4			10.2			27.4			20.9
Provision for income taxes		2.9			2.5			5.5			5.1
Net earnings	$	11.5		$	7.7		$	21.9		$	15.8
Diluted net earnings per share	$	0.12		$	0.08		$	0.23		$	0.17
Growth - revenues		19	%		16	%		17	%		13	%
Organic growth in fees (1)		18	%		16	%		17	%		13	%
Growth - pretax earnings		41	%		21	%		31	%		5	%
Compensation expense ratio		54	%		56	%		55	%		55	%
Operating expense ratio		28	%		29	%		28	%		28	%
Pretax profit margin		16	%		13	%		15	%		14	%
Effective tax rate		20	%		25	%		20	%		25	%

See notes to second quarter 2004 earnings release and non-GAAP financial measures on page 5.

(3 of 6)

Arthur J. Gallagher & Co.

Segment Statement of Earnings

(Unaudited - in millions except per share data)

	3 Months Ended June 30, 2004			3 Months Ended June 30, 2003			6 Months Ended June 30, 2004			6 Months Ended June 30, 2003
FINANCIAL SERVICES SEGMENT
Investment income	$	24.1		$	17.9		$	44.7		$	33.2
Impact of FIN 46 on investment income		35.0			—			60.9			—
Investment gains (losses)		2.1			—			4.6			(25.7	)
Revenues		61.2			17.9			110.2			7.5
Investment expenses		22.0			14.2			38.8			21.5
Impact of FIN 46 on investment expenses		33.9			—			58.6			—
Interest		2.4			2.0			4.3			4.1
Depreciation		2.3			1.8			4.2			3.7
Impact of FIN 46 on depreciation expense		1.1			—			2.3			—
Expenses		61.7			18.0			108.2			29.3
Earnings (loss) before income taxes		(0.5	)		(0.1	)		2.0			(21.8	)
Provision (benefit) for income taxes		(0.1	)		—			0.4			(5.4	)
Net earnings (loss)	$	(0.4	)	$	(0.1	)	$	1.6		$	(16.4	)
Diluted earnings (loss) per share	$	—		$	—		$	0.02		$	(0.17	)
Consolidated Statement of Earnings (Unaudited - in millions except per share data)
	3 Months Ended June 30, 2004			3 Months Ended June 30, 2003			6 Months Ended June 30, 2004			6 Months Ended June 30, 2003
TOTAL COMPANY
Commissions	$	195.1		$	180.3		$	376.9		$	348.9
Fees		129.1			109.1			245.9			213.3
Investment income - fiduciary		3.3			2.0			6.1			4.0
Investment income - all other		59.1			17.9			105.6			33.2
Investment gains (losses)		2.1			—			4.6			(25.7	)
Gross revenues		388.7			309.3			739.1			573.7
Less brokerage		(9.8	)		(10.3	)		(18.7	)		(20.4	)
Revenues		378.9			299.0			720.4			553.3
Compensation		179.7			161.6			350.4			318.6
Operating		68.3			63.5			135.3			126.3
Investment expenses		55.9			14.2			97.4			21.5
Interest		2.4			2.0			4.3			4.1
Depreciation		9.0			7.2			17.6			14.4
Amortization		6.0			2.2			9.2			4.3
Expenses		321.3			250.7			614.2			489.2
Earnings before income taxes		57.6			48.3			106.2			64.1
Provision for income taxes		11.5			12.1			21.2			16.0
Net earnings	$	46.1		$	36.2		$	85.0		$	48.1
Diluted net earnings per share	$	0.49		$	0.39		$	0.90		$	0.52
Dividends declared per share	$	0.25		$	0.18		$	0.50		$	0.36
Other Information
Diluted weighted average shares outstanding (000s)		94,343			93,651			94,152			92,983
Common shares repurchased (000s)		—			515			555			754
Annualized return on beginning tangible net worth (2)								43	%		24	%
Number of acquisitions closed		3			1			10			5
Workforce (includes acquisitions)								7,564			7,077
Earnings Before Investment (Gains) Losses, Depreciation, Amortization and Stock Compensation Expense (3)
Net earnings	$	46.1		$	36.2		$	85.0		$	48.1
Investment (gains) losses		(2.1	)		—			(4.6	)		25.7
Depreciation		9.0			7.2			17.6			14.4
Amortization		6.0			2.2			9.2			4.3
Amortization of deferred comp and restricted stock		2.7			2.2			4.8			3.2
Stock compensation expense		1.3			—			2.5			—
Tax effect		(3.4	)		(2.9	)		(5.9	)		(11.9	)
Earnings before investment (gains) losses, depreciation, amortization and stock compensation expense	$	59.6		$	44.9		$	108.6		$	83.8
On a diluted per share basis	$	0.63		$	0.48		$	1.15		$	0.90

See notes to second quarter 2004 earnings release and non-GAAP financial measures on page 5.

(4 of 6)

Arthur J. Gallagher & Co.

Consolidated Balance Sheet

(Unaudited - in millions except per share data)

	Jun 30, 2004			Dec 31, 2003
Cash and cash equivalents	$	258.3		$	193.6
Restricted cash		478.5			437.6
Trading securities		—			5.0
Investments - current		27.5			26.9
Premiums and fees receivable		1,439.4			1,286.4
Other current assets		139.7			158.4
Total current assets		2,343.4			2,107.9
Investments - long-term		128.0			121.0
Fixed assets related to consolidated investments - net		214.1			205.2
Other fixed assets - net		58.7			61.0
Deferred income taxes		151.1			137.8
Other noncurrent assets		53.6			45.8
Goodwill - net		157.4			138.3
Amortizable intangible assets - net		111.9			84.6
Total assets	$	3,218.2		$	2,901.6
Premiums payable to insurance and reinsurance companies	$	1,930.3		$	1,743.5
Accrued compensation and other accrued liabilities		232.2			219.3
Unearned fees		36.6			27.3
Income taxes payable		21.9			24.3
Other current liabilities		16.8			16.0
Corporate related borrowings		—			—
Investment related borrowings - current		38.7			30.9
Total current liabilities		2,276.5			2,061.3
Investment related borrowings - long-term		143.4			122.1
Other noncurrent liabilities		101.5			99.1
Total liabilities		2,521.4			2,282.5
Stockholders’ equity:
Common stock - issued and outstanding		91.9			90.0
Capital in excess of par value		143.7			105.5
Retained earnings		481.8			442.3
Unearned deferred compensation		(13.2	)		(9.6	)
Unearned restricted stock		(7.4	)		(9.1	)
Total stockholders’ equity		696.8			619.1
Total liabilities and stockholders’ equity	$	3,218.2		$	2,901.6
Other Information
Tangible net worth (4)	$	427.5		$	396.2
Book value per share	$	7.58		$	6.88
Tangible book value per share (5)	$	4.65		$	4.40

Notes to Second Quarter 2004 Earnings Release and Non-GAAP Financial Measures

This exhibit contains supplemental non-GAAP financial information within the meaning of Regulation G of the SEC’s rules. Consistent with Regulation G, a description of such information is provided below and a reconciliation of certain of such items to U.S. generally accepted accounting principles (GAAP) is provided elsewhere in this press release. Gallagher believes the items described below provide meaningful additional information, which may be helpful to investors in assessing certain aspects of Gallagher’s operating performance and financial condition that may not be otherwise apparent from GAAP. Industry peers provide similar supplemental information, although they may not use the same or comparable terminology and may not make identical adjustments. This non-GAAP information should be used in addition to, but not as a substitute for, the GAAP information.

Non-GAAP Measures Defined

(1) Organic growth excludes the first twelve months of net commission and/or fee revenues generated from the acquisitions accounted for as purchases and the net commission and/or fee revenues related to operations disposed of in each year presented. These commissions and fees are excluded from organic revenues in order to determine the revenue growth that is associated with the operations that were a part of Gallagher in both the current and prior year.

(2) Represents year-to-date net earnings divided by total stockholders’ equity, less net balance of goodwill and amortizable intangible assets, as of the beginning of the year.

(3) Represents net earnings before the after-tax effect of investment gains (losses), depreciation, amortization, amortization of deferred compensation and restricted stock expense and stock compensation expense.

(4) Represents total stockholders’ equity less net balance of goodwill and amortizable intangible assets.

(5) Represents tangible net worth divided by the common shares outstanding at the end of the period.

(5 of 6)

Arthur J. Gallagher & Co.

Unconsolidated Investment Summary

(Unaudited - in millions)

											June 30, 2004
	June 30, 2004						December 31, 2003				LOCs & Financial Guarantees		Funding Commitments
	Current			Long-term			Current		Long-term
Unconsolidated Investments:
Direct and indirect investments in Asset Alliance Corporation (AAC)	$	0.6		$	47.7		$	1.3	$	49.8	$	—	$	—
Low income housing (LIH) developments:
Bridge loans		6.7			—			9.5		—		—		—
Partnership interests		—			2.2			—		3.1		—		—
LIH Developer		—			8.8			—		7.6		—		—
Alternative energy investments:
Owned partnership interests		2.0			22.3			1.5		28.3		5.9		0.4
Biogas project		—			14.0			—		—		—		—
Partnership interest installment sales		17.2			7.1			14.6		8.0		—		—
Bermuda insurance investments		—			20.4			—		20.4		6.7		—
Real estate, venture capital and other investments		1.0			5.5			—		3.8		—		3.8
Total unconsolidated investments		27.5			128.0			26.9		121.0		12.6		4.2
Non-recourse borrowings - Biogas project		(0.2	)		(13.8	)		—		—		—		—
Net unconsolidated investments	$	27.3		$	114.2		$	26.9	$	121.0	$	12.6	$	4.2

Consolidated Investment Summary

(Unaudited - in millions)

							June 30, 2004
							LOCs & Financial Guarantees		Funding Commitments
	June 30, 2004			December 31, 2003
Home office land and building:
Fixed assets	$	101.0		$	100.9		$	—	$	—
Accumulated depreciation		(14.5	)		(13.2	)		—		—
Non-recourse borrowings - current		(0.8	)		(0.8	)		—		—
Recourse borrowings - current		—			—			—		—
Non-recourse borrowings - noncurrent		(73.6	)		(74.0	)		—		—
Recourse borrowings - noncurrent		(3.0	)		(3.0	)		—		—
Net other consolidated assets and liabilities		2.9			2.2			—		—
Net investment		12.0			12.1			—		—
Florida community development:
Fixed assets		59.6			56.0			—		—
Accumulated depreciation		—			—			—		—
Non-recourse borrowings - current		(16.3	)		(10.7	)		—		—
Recourse borrowings - current		(17.0	)		(17.0	)		—		—
Non-recourse borrowings - noncurrent		(0.2	)		(0.2	)		—		—
Recourse borrowings - noncurrent		(12.4	)		(12.4	)		—		—
Net other consolidated assets and liabilities		(2.7	)		(3.6	)		12.8		1.5
Net investment		11.0			12.1			12.8		1.5
Airplane leasing company:
Fixed assets		51.8			51.8			—		—
Accumulated depreciation		(12.3	)		(10.5	)		—		—
Non-recourse borrowings - current		(2.5	)		(2.4	)		—		—
Recourse borrowings - current		—			—			—		—
Non-recourse borrowings - noncurrent		(31.2	)		(32.5	)		—		—
Recourse borrowings - noncurrent		—			—			—		—
Net other consolidated assets and liabilities		0.9			0.9			—		—
Net investment		6.7			7.3			—		—
Syn/Coal partnerships:
Fixed assets		46.4			35.2			—		—
Accumulated depreciation		(17.9	)		(15.0	)		—		—
Non-recourse borrowings - current		(1.9	)		—			—		—
Recourse borrowings - current		—			—			—		—
Non-recourse borrowings - noncurrent		(9.2	)		—			—		—
Recourse borrowings - noncurrent		—			—			—		—
Net other consolidated assets and liabilities		1.1			0.6			—		—
Net investment		18.5			20.8			—		—
Total consolidated investments:
Fixed assets		258.8			243.9			—		—
Accumulated depreciation		(44.7	)		(38.7	)		—		—
Non-recourse borrowings - current		(21.5	)		(13.9	)		—		—
Recourse borrowings - current		(17.0	)		(17.0	)		—		—
Non-recourse borrowings - noncurrent		(114.2	)		(106.7	)		—		—
Recourse borrowings - noncurrent		(15.4	)		(15.4	)		—		—
Net other consolidated assets and liabilities		2.2			0.1			12.8		1.5
Net investment	$	48.2		$	52.3		$	12.8	$	1.5

(6 of 6)

# # #